SBI cuts MCLR by 5 bps; term deposit rates also slashed

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Additionally, the bank has reduced interest rates on housing loans, which will now be available from 8% p.a., while vehicle loans would be priced from 8.50% p.a.State Bank of India (SBI) on Friday cut its marginal cost of funds-based lending rate (MCLR) by 5 basis points (bps) across all tenors, a day after the Reserve Bank of India’s move to allow term repos for 1-year and 3-year tenors. This will effectively reduce the cost of funds for the bank. Meanwhile, the lender made larger cuts in its term deposits rates by 10-50 bps in the retail segment and 25-50 bps in the bulk segment, citing surplus liquidity in the system.The one-year MCLR of the bank now stands at 7.85% per annum. In comparison, the largest private sector lender HDFC Bank has its one-year MCLR pegged at 8.15% p.a. effective February 7. The one-year MCLR for Bank of Baroda stands at 8.25%. “The impact of recent RBI policy measures and reduction in deposit rates will be reflected in the next review of MCLR,” the lender said in a release.With the introduction of long-term repo operations, the banks’ dependence on term deposits has been reduced as borrowing from the RBI can be done at a cheaper price. For retail term deposits in tenor of ‘1 year to less than 2 years’ at SBI, the interest rate has been reduced to 6% for the public, down 10 bps from 6.1%.For senior citizens, the rate stands at 6.5%, down 10 bps from 6.6%. Meanwhile, HDFC Bank offers an interest rate of 6.3% on retail term deposits less than Rs 2 crore in the ‘1 year 1 day to 2 years’ tenor, while senior citizens can avail a rate of 6.8%.Bank of India also reduced its MCLR by 10 bps for maturities up to six months effective February 10. Additionally, the bank has reduced interest rates on housing loans, which will now be available from 8% p.a., while vehicle loans would be priced from 8.50% p.a.RBI governor Shaktikanta Das in the monetary policy said the external benchmark system introduced from October 1, 2019 had strengthened monetary transmission. “During October-December 2019, the weighted average lending rate (WALR) of domestic banks on fresh rupee loans declined by 18 bps for housing loans, 87 bps for vehicle loans and 23 bps for loans to micro, small and medium enterprises (MSMEs),” he said. The one-year median MCLR has declined by 55 bps between February 2019 and January 2020. The WALR on fresh rupee loans sanctioned by banks has declined by 69 bps and the WALR on outstanding rupee loans by 13 bps during February-December 2019. “The decision to allow long-term repo operations for 1-year and 3-years for total amount of Rs 1 trillion at policy repo rate will bring down cost of funds for banks and will facilitate better transmission within the current constraints of downward rigidity of deposit rates,” Rajnish Kumar, chairman, SBI, had said.Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

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